Dollar Makes A Small Rally

Christmas is finally over and I’m kind of glad. All that celebrating resulted in me getting sick on Christmas day. Even as I am writing, I have a box full of tissues next to my computer, and an almost empty box of Tylenol flu beside that. But as sick as I am, the markets will not wait and they continued to move, even as Big Pippin lies in his bed, sick as a dog!

So back to the forex….The market moved in favor of the Dollar today as New Home Sales grew 3.4% to 1.047M units. The housing market has been dragging for a while now, so everyone is looking for some kind of sign that we are seeing a bottom in the real estate bust. This number gave enough fuel for the markets to push the Dollar up, especially since there weren’t any other major news reports to factor in today.

But housing isn’t what I’m really looking at for the long term outlook on the buck. No sir/ma’am! What I want to see are the consumer spending numbers. I’ve been looking at the year-over-year, quarterly growth for consumer spending and although it has been positive, the trend is definitely moving down. I think one or two more drops in consumer spending reports will be enough to cause the rest of the US economy to fall, which is bad news for the Greenback! Just keep that in mind as we start off the new year next week.

Coming Up:

US Chicago PMI
10:00 am ET; 15:00 GMT
Previous= 49.9; Consensus= 50; Forecast Range= 48.0-53.5
So you can see that we have a pretty split decision for the PMI number tomorrow. Remember, a reading above 50 is dollar positive and a reading below 50 is dollar negative.

US Consumer Confidence
10:00 am ET; 15:00 GMT
Previous= 102.9; Consensus= 101.0; Forecast Range= 101.0-104.0
Most traders use Consumer Confidence as a leading indicator for Consumer Spending, but looking at the hard data, that doesn’t necessarily happen. In my eyes, Consumer Confidence does not accurately predict Consumer Spending. However, because the majority of the market does use this as a leading indicator for Consumer Spending, I will still keep my eye on it.

US Existing Home Sales
10:00 am ET; 15:00 GMT
Previous= 6.24M; Consensus= 6.20M; Forecast Range= 6.1M-6.3M
With the positive New Home Sales numbers today, the market will be looking for follow through with the Existing Home Sales report.

Chart Analysis:

EUR/USD

The Euro is on its way towards 3100 and it looks like that could be a good support area because that is where the 200 SMA is on the 4hr chart. Stochastics on both the 4hr and daily chart are heading down so the favor is in still in the Dollar, but unless the US reports are really good tomorrow, I expect the Euro to bounce back up.

GBP/USD

The Cable is also heading down and the next support area is 9460 which is where the 38% Fib line is on the daily chart. Stochastics looks similar to the Euro’s stochastics as they are both heading down. So the momentum is still in the Dollars favor, but I don’t think the Cable will break below its 38% Fib line.

USD/CHF

The Swissy looks prime for a short trade. Right now it’s heading towards its 61% Fib line and is testing its 50 SMA on the daily chart. Both 4hr and daily stochastics are in overbought territory, so now looks like a good time to short.

Trade Idea:

Short at 1.2300; Stop at 1.2380; Target= 1.2200; If price hits 2250, move your stop to breakeven or close half your position.

USD/JPY

The Yen has been very resilient against the Buck and even after dropping today, it still managed to close at around 118.70. Daily stochastics is STILL overbought like it has been for the past several days, but it finally looks like it’s heading down. I’ve been saying it over and over, but it still looks like the Yen is going to drop. 118.23 is a good target level since that is where the 50 SMA is on the 4hr chart.

Conclusion:

The consensus numbers for the US reports tomorrow project either flat or slightly declining numbers. If this is the case, I expect to see the Dollar fall which would be good for me, because my technical analysis also shows signs for the Dollar to fall. When both fundamental and technical analysis align, you usually get some awesome trading!

  • pipskweezergeezer

    Really good ideas on trade strategies on these majors!

  • pipskweezergeezer

    Really good ideas on trade strategies on these majors!